The decline of green investments

I blogged a long time ago that getting involved in anything green would be a mistake, and it is always a pleasure to be able to say I told you so. Since then, the bottom has fallen out of carbon trading, green power subsidies are falling, and ‘green’ generally has lost a great deal of its fashionable status. The genral public has lost trust in anyone proclaiming doom on the basis of supposed AGW (man made global warming). I was greatly amused to find the first ads Google put alongside were for carbon trading companies. Click them, those companies will need all the help they can get. The traders, not Google, who are doing just fine.

This isn’t the beginning of the end, that was ages ago. What we are now seeing is the rapid collapse phase, before the green industry as a whole will start to level off with the hard core of supporters in classic S-curve manner. Among those who are currently involved but are deserting like rats from a sinking ship are governments and big companies especially those who have been investing in wind energy. Much of the US government is running away now and trying to block any further green programmes while closing down existing ones. The Germans, the Japanese, and the Australians are all going in that direction too. The UK government is even showing a few signs of reform now. Expect that the previously high but already falling subsidies for wind farms and solar panels will soon collapse or even be blocked, though existing contracts will have to be honoured of course.

I suggested that the moment that the CERN CLOUD experiment crew announced their results would be critical. They have now announced them, and serious scientists will note their conclusions and start worrying about their own affiliations, even if they historically were ardent warmists. It will be extremely hard now to retain any momentum for further green programmes based on avoiding  human-caused climate change. It looks increasingly certain that the warming has stopped and was mostly due to natural causes, especially solar activity. If you look at all the results of experiments and measurements over the last year or two, the contribution to previous warming from CO2 looks like being at most 15%, probably less than 10%.

That should scare off anyone thinking of getting into carbon avoidance industry, and will certainly reduce greatly the value of investments in associated assets.

My advice: if you still can, get out now.

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Future socio-economic conflict

I actually posted this on my main blog ages ago, and forgot to copy it to the finance one. Anyway…

Democracy isn’t perfect, but as a means of keeping a large population working together more or less as a team, it is the least bad system we know. Such is the received wisdom. One of the major faults of democracy is that it sometimes allows a majority of beneficiaries to vote in measures that they know will have to be paid for by other people. The people paying may have no choice if they are a minority, or otherwise without power, and simply be unwilling victims of a selfish majority. Such is the situation facing much of the west right now. Many countries have overspent, with governments investing large amounts of borrowed money to ensure votes from large parts of the population, knowing that the price would be paid by other future governments and by different parts of the population. Now that the time has come for savings to be made, we are seeing some very selfish squabbling indeed, with everyone wanting someone else to pay the bills, leaving them undisturbed. The results in some countries are not pretty, with street demonstrations and rioting. The UK hasn’t gone that far yet.

There are some basic principles that most people give at least lip service too. The weak and the deserving poor must be protected, and those that are able to do so should carry more of the burden. No major political party disagrees significantly with that, though they differ enormously when defining poor and deserving. Until recently, there has also been a consensus that children should be protected. Now that appears to have vanished. The debts that have been incurred by the adult generations are to be handed on to their kids, who of course have no legal say in the matter. Various groups of adults blame each other for the mess, but it is the future generations who will suffer most of the pain. Any suggestions of reductions of benefits, pensions, pay, jobs or public services are being resisted furiously, but if everyone insists that we must delay repayments, then it is today’s and tomorrow’s kids who are being left with much of the bill. And of course, if the services and benefits are eventually reduced, as they must, those same kids picking up the bill won’t even benefit from them.

This does not seem a sensible, moral, or sustainable approach to democracy. If unwilling generations are forced to pick up large bills for benefits only available to their ancestors, we can be pretty sure they will rebel. Inter-generational conflict will see young people refusing to pay for the luxurious benefits their elders voted for themselves.

The same is true of any other sectors of society. All must see that they are having a reasonable package of price and reward. This is important, as it is this balance that make democracy stable and prevents revolution. No sector should be seen to benefit unduly at the expense of others.

Some people have gained much more than others from the various decisions that accrued the debts we now face, indeed some of the costs can be attributed to vote buying. For example, much of the debt is due to generous pension commitments in the public service. While private industry long ago recognised that increasing lifespans have made traditional final salary pension schemes unaffordable, and abolished them, the public sector has conspicuously carried on large scale recruitment with terms and conditions associated with lifespans that became out of date in the 1960s, knowing they were unaffordable (increasing longevity has caught noone by surprise) , and understating costs by using different pension valuation formulas than the private sector (e.g. 8:1 instead of 20:1). It does not seem unreasonable for those paying the bills to demand that terms and conditions such as pensions, holidays, pay and bonuses, be realigned to a more sensible baseline. All wealth generation arises in the private sector, so it makes little sense to provide public service conditions more generous that their equivalent in the private sector. Of course, those living very comfortably at the expense of others can’t be expected to surrender their comfort without a struggle, but if public sector staff are seen to be very comfortable while those who have to pay them suffer, conflict is inevitable as stresses increase.

Similarly, benefits and welfare are already being addressed to ensure that those who are able to work (including those who are sick or disabled but who retain some saleable skills and abilities) must do so before they can claim state support, and to ensure that working will always make them wealthier than idleness. In a wealthy society, provided that everyone looks after themselves as far as they can, the state can easily ensure that everyone can afford survival with reasonable comfort. Ideally, welfare provides a basic existence for everyone, and then everyone could add to their personal comfort by making whatever contribution they reasonably can. This would be affordable and sustainable and would not disincentivise personal effort. It will take time to deliver this principle, but we are heading in that general direction.

But inter-generational problems will prove far more problematic than those between private and public. Inter-generational conflict in fact is already overdue. For me, the biggest surprise about the French demonstrations against pension age increase is not that they are happening, which isn’t surprising at all, but that young people have also joined the demonstrations. It is the young who are being left with the huge bills, and they ought to be demonstrating in favour, not against pension age rises. Today’s retirees are retiring at the same age as their parents, but unlike them, they will cost far more than they ever paid in. They are in effect demanding a huge unearned windfall, paid for by younger people. The older ones on the demonstrations may hope to benefit similarly themselves, but it is near impossible that younger people will be able to do so, yet they are being expected to pay the bills for those older people fortunate enough to do so. When someone else gets a big cake free, and you have to pay for it, it is not unreasonable to be annoyed. It is very surprising if you demonstrate in support of them getting the cake. The young French may be a little sluggish in realising the situation they are in, but they will catch up eventually. In the UK, the retirement age increase looks like it is being accepted, but it still leaves the young with huge bills. With the duration of the payback times being considered, many of the kids who will have to pay the bills are in school, and aren’t politically aware yet, but as they come on stream politically and realise the enormity of the debts they face entering adulthood, we should expect them to start complaining. We may well see a Europe-wide rebellion against older population, and demands that they pay for themselves and their own retirements.

Immigration is an interesting issue too. The papers are full of stories about resentment of perceived advantages enjoyed by immigrant populations, but most of the stories are from communities that are under stress with limited employment or housing. The economics are interesting. On one side, someone immigrating and becoming a citizen gains a share of all the accumulated wealth of the country built over the centuries, and we may also pick up some liabilities to overseas family. On the other hand, we get the benefits of their education and skills free, and presumably benefit from any wealth they bring with them, plus their future contributions, and perhaps those of their families. And we gain also from their overseas links and networks, helping trade and reducing military threats. Set against that, some people emigrate, with the reverse economics. Of course, the two groups don’t match. Emigration often happens in retirement, when people have a lot of wealth. Immigration tends to be of younger people with lower wealth. And of course, there is a lot in between in both directions. It is this that presents the biggest problem. Many people who immigrated to the UK to get a better life are now going back, because conditions there are improving while conditions here worsen. This new flow may be called remigration. It is strongest in those areas that are most useful, such as engineering and medicine. Remigration is a threat to the economy, because we tend to lose those immigrants who make the greatest contributions, leaving skills shortages, but we still are left with the costs of the lower contribution immigration. Adding to this, intergenerational conflict, if left unsolved, could lead to a large brain drain as young people decide to leave for lower tax regimes elsewhere, leaving behind the debts they were to be saddled with. If we lose the most able people from society, we not only lose their economic contribution but also face a skills shortage. The nightmare scenario would see the UK becoming an ill-funded retirement home, with lots of expensive old people, lots of people needing state support, a lot of people just about paying their own way, and too few wealthy taxpayers to pay for the difference.

So it is rapidly becoming apparent that society has many stresses to face over the next decade, and obvious that some communities in France are already at the point of rebellion. The first trouble is resistance to change. But soon some parts will realise that they want change and demand it, then trouble won’t be against the state but between communities. The degree to which that spreads to the UK, and to other pressures, is debatable, but we will soon see.

Future high street retailing

Retailers are complaining afresh about their high street shops being finely balanced between survival and closure: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8358028/Retail-chiefs-warn-Treasury-over-wave-of-shop-closures.html.

It is hard not to feel some sympathy with them, but I also feel a degree of annoyance at their lack of vision. They look like yet another British industry group whose managers can seemingly only understand two tools – cost reduction and price increases. I guess they could get jobs with government if they are made redundant, they are obviously a good match for those who are seemingly only able to tweak tax and interest rates (I feel another blog entry coming on).

In brief, many people have much less money due to the recession, and petrol and food prices have risen a lot, so they have consequently reduced their spending on clothes to help balance their budgets. Like many people, I buy almost everything online or in out of town superstores, and only ever go into town if I need clothes. But the clothes I buy do come from the high street, apart from basic stuff that you can easily pick up at Tescos. (I did notice that my favourite men’s shop in Ipswich has now gone. I have often joked that Ipswich used to be a one-horse town, but then the horse died. So my joke has become a personal reality. Anyway, back to the point).

The retail industry leaders want less financial and administrative pressure on them from government (fair enough) and the ability to pay less to young people (not so sure here). They argue that being able to reduce wages for young workers would let them employ more, thus increasing employment and leading to a retail-led recovery. There is some truth in the argument of course. Reducing the cost of labour allows prices to be reduced, increasing sales. Extra sales stimulates more manufacturing, more supporting services, more R&D, new ideas, and some of all that might be suitable for export. So the argument is not without merit, but economics is very complex, and it is very easy to trip up and invest too much in policies with poor returns. For example, retailers could simply abuse wage reduction to increase profit margins, without either creating  increased jobs or reducing customer prices. Also, many clothes are imported so much of the associated economic benefit from increasing sales would go elsewhere. So, even though allowing retailers to pay lower wages might yield a little economic benefit for the UK as a whole, I think other policies might prove better.

There are many factors in costs of running a high street shop, and many that affect the overall cost of a shopping trip other than the price of the goods. Some have a natural feedback loop. If lots of high street shops close, and there is insufficient demand for yet more coffee shops, the rents demanded by the property developers will fall – they make nothing at all if they charge so much that their building is left vacant. If town centres are left sufficiently empty, the amount that councils can demand for car parking will fall.
There are also lower limits on how far demand will fall. Not everyone is severely affected by recession. A high proportion of the workforce is still in jobs with high job security, especially in the public sector. Some have just as much money as ever, and if anything, have benefited from reducing prices and interest rates. Most are not facing any likely redundancy that might make them unwilling to spend. Others have seen only small reductions in income, via reductions in pay rises or overtime. This bulk of the population guarantees a continued demand for products and services, even in luxury sectors. They will still want clothes, regardless of price reductions, so some stores will certainly be able to stay in business.
So although reducing wages and using the savings to lower prices or increase jobs a bit might help a little, what we really need is the development and deployment of new manufacturing and services that can be sold elsewhere as well as internally. Moving wealth around inside the economy doesn’t help nearly as much, and only yields slow growth. If the retailers focused less on cost reduction and more on other ways to stimulate sales, the benefits would be greater. This is actually true throughout the UK economy, in every sector. UK managers have generally been far to focused on cost reductions instead of looking at ways to improve revenues.

During the 1990s, many retailers introduced coffee shops and restaurants into their high street stores. Since then, there has been little change. The next decade will have to be a bit more imaginative. There are many areas where shops should be innovating and many new areas will be opening in the next few years. High street shopping could and should be much more exciting, and retail revenues could be increased. Some of the services and technologies required would be well suited to exports, so the UK economy as a whole would grow. It is developing these that should be the priority, not wage reductions. So what are they? I looked at some upcoming retail trends in my blog last summer, slightly more nicely packaged in http://futurizon.com/articles/retailing.pdf, but I’ll cut and paste the more relevant bits now to save you having to click, and maybe update a bit.

Since the iPhone and iPad became popular, followed by numerous competitive offerings, mobile internet access is now much more useful and accessible. People can now access the net to compare products and prices, or get information, or add value to almost every activity. But the underlying, less conspicuous trend here is that people are getting much more used to accessing all kinds of data all the time, and that ultimately is what will drive retail futures. With mobile access increasing in power, speed and scope, the incentives to create sites aimed at mobile people is increasing, and the tools for doing so are getting better. For example, people will be able to shop around more easily, to compare offerings in other shops even while they remain in the same one. Looking at a suit in M&S, I’ll also be able to see what comparable suits Next has across the street, and make a sensible decision whether it is worth going to try it on.
This will be accelerated by the arrival of head-up displays – video visors and eventually active contact lenses. The progress in 3d TV over the next few years will result in convergence of computer games and broadcast media, and this will eventually converge nicely into retailing too, especially if we add in things like store positioning systems, gesture recognition and artificial intelligence (AI) based profile and context engines. These are all coming quickly. Add all this in to augmented reality, and we have a highly versatile and powerfully immersive environment merged with the real world. It will take years for marketers and customers to work out the full scope of the resultant opportunities. Think of it this way: when computing and telecoms converged, we got the whole of the web, fixed and mobile. This time it isn’t just two industries converging – it is the whole of cyberspace converging with the whole of the real world. And while technology will be the main driver, it will also stimulate a great deal of innovation and progress in the human sides of retailing.

So we should expect decades of fruitful development, it won’t all happen overnight. Lots of companies will emerge, lots of fortunes will be made, and lost, and there will also be lots of opportunities for sluggish companies to be wiped out by new ones or those more willing and able to adapt. Companies that only look at cost reductions will be among the losers. The greatest certainty is that every company in every industry will face new challenges, balanced by new opportunities. Never has there been a better time for a good vision, backed up by energy and enthusiasm. All companies can use the web and any company can use high street outlets if they so desire. It is a free choice of business model. Nevertheless, not all parts of the playing field are equal. Occupying different parts requires different business models. If a store has good service but high prices and no reason someone should not just buy the product on-line after getting all the good advice, then many shoppers will do just that.

An obvious response is to make good use of exclusive designs. A better and longer lasting response is to captivate the customer by ongoing good service, not just pre-sale but after-sale too. A well cared for customer is more likely to buy from the company providing the good care. If staff build personal relationships and get to know their customers, those customers are highly unlikely to buy elsewhere after using their services. Augmented reality isn’t just a toy for technophiles. We’ll all be using it, just as we all now use the web and mobiles. Augmented reality provides a service platform where companies can have an ongoing relationship with the customer. Relationships are about human skills, technology is just a tool-kit.
As we go further down the road of automation, the physical costs of materials and manufacturing will generally fall for any particular specification. Of course, better materials will emerge and these will certainly cost more at first, but that doesn’t alter the general cost-reduction trend. As costs fall, more and more of the product value will move into the world of intangibles. Brand image, trust, care, loyalty, quality of service and so on – these will account for an increasing proportion of the sale price. So when this is factored in, the threat of customers going elsewhere lessens.

AI will play a big role in customer support in future retail, extending the scope of every transaction. Recognising when a customer wants attention, understanding who they are and offering them appropriate service will all fall within the scope of future AI. While that might at first seem to compete with humans, it will actually augment the overall experience, enabling humans to concentrate on the emotional side of the service. Computers will deal with some of the routine everyday stuff and the information intensive stuff, while humans look after the human aspects. When staff are no longer just cogs in a machine, they will be happier, and of course customers get the best of both worlds too. So everyone wins.

Adding gaming will be one of the more fun improvements. If a customer’s companions don’t want to just stand idly and get bored while the customer is served, playing games in the shop might be a pleasant distraction for them. But actually games technology presents the kind of interface that will work well too for customers wanting to explore how products will look or work in the various environments in which they are likely to be used. They can do so with a high degree of realism. All the AI, positioning, augmented reality and so on all add together, making the store IT systems a very powerful part of the sales experience for shopper and staff alike.

Positioning systems exist already, via GPS and mobile phone networks, with Galileo also maybe coming soon. Indoors, some of these systems don’t work, so there is a potential niche for city positioning systems that extend fully inside buildings. With accurate positioning, and adding profiling and AI, retailers can offer very advanced personalised services.

Social networking will change shopping regardless of what retailers do, but if the retailers are proactively engaged in social networking, adding appropriate services in their stores, and capitalising on the various social networks fads, that is surely better than being helpless victims.

Virtual goods have a significant market – online gaming and social networking has created a large market for virtual things, and some of these overlap with stuff sold in high street shops – clothing, cards, novelties, even foods. People in games spend real money buying virtual goods for their characters or their friends. There is no reason why this can’t happen in the high street. Someone playing a fantasy character in World of Warcraft may well be open to trying on a magic cloak in a high tech changing room in a high street clothes store, or drinking something in a coffee shop based on a potion their character is drinking. In fact, the good on offer in a shop could extend to vastly more than are currently on display. With augmented reality, a shopper might walk around a physical store where the entire display area is full of goods customised to them personally. The physically present items that are not suited to them might be digitally replaced in their visors by others that are. This increases the effective sales area dramatically. The goods need not be entirely virtual of course. They might well be real physical products available online, or form a larger store, or from associates. We may see companies like Amazon using real high street shops to sell goods from their stores – they’ve effectively been doing that with bookshops for years without even having the consent of the bookshops, so why not extend it using proper business alliances, implemented professionally, instead of simply digitally trespassing?

Try-on outlets are another obvious development. People mostly want to try clothes on before purchasing them (I am one of the many men who lets their wives buy most of their clothes, so am not sure how much of a ‘mostly’ it is). But not everyone is a standard shape or size, in fact very few people are. So although an item might fit perfectly, usually it won’t. Having a body scan to determine your precise shape and size, and having a garment custom manufactured would be a big improvement. With advanced technology and logistics, this wouldn’t add very much to the purchase price. A shopper in a future high street outlet might try on a garment, and if they like it, they would take it to the checkout, or more likely, just scan the price tag with their mobile. Their size and shape would be documented on a loyalty card, mobile device, store computer, or more likely just out there somewhere on the cloud. The garment then goes back on the shelf. A custom garment (the customer may be able to choose many personalisation options at this stage) would then be manufactured and delivered to the person’s home or the store, and this process could well be as fast as overnight. The customer gets a garment perfectly suited to them, that fits perfectly. The shop also gains because only one item of each size needs to be stocked, so they can store more varieties. The store evolves into a try-on outlet, selling from a greatly increased range of products. Their revenue increases greatly, and their costs are reduced too, with less risk of being left with stuff that won’t sell. Local manufacturing benefits, because the fast response prohibits long distance outsourcing. If the services and technologies required for all of these advances are developed in the UK, there may well be large export potential too. From a UK perspective, everyone wins. None of this would happen simply by trying to cut costs.

Clothes and accessories stores will obviously benefit greatly from such technology, allowing customers to choose more easily. But technology can also add to the product itself. Some customers will be uninterested in adding technology whereas for others it will be a big bonus having the extra features. Today, social networking is just starting to make the transition to mobile devices. In a few years’ time, many items of accessories or clothes will have built in IT functionality,enabling them to play a leading role in the wearer’s social networking, broadcasting personal data into surrounding space or coming with a virtual aura, loaded with avatars that appear differently to each viewer. Glasses can do this, and also provide displays, change colour using thin film coatings, and even record what the wearer sees and hears. They might even recognise some emotional reactions via pupil dilation, identifying people that the user appears interested in, for example. Health is another are obviously suited to jewellery and accessories, many of which are in direct contact with skin. Accessories can monitor health, act as a communications device to a clinic, even control the release of medicines in smart capsule.

But the biggest change in retailing is certainly the human one, adding human-based customer service. Technology is quickly available to everyone and eventually ceases to be a big differentiator, whereas human needs will persist, and always offer a means to genuine value add. This effect will run throughout every sector and will bring in the care economy, wherehuman skills dominate and computers look after routine transactions at low cost. Robots and computers will play an important part in the future, but humans will dominate in adding value, simply because people will always value people above machines – or indeed any other organic species. Focusing on human value-add is therefore a good strategy to future proof businesses. The more value that can be derived from the human element, the less vulnerable a business will be from technology development. The key here is to distinguish between genuine human skills and those where the human is really just acting as part of a machine.Putting all this together, we can see a more pleasant future of retailing. As we recover from the often sterile harshness of web shopping and start to concentrate more on our quality of life, value will shift from the actual physical product itself towards the whole value of the role it plays in our lives, and the value of associated services provided by the retailer. As the relationship grows and extends outside the store, retailing will regain the importance it used to have as a full human experience. Retailers used to be the hub of a community and they can be again if the human side is balanced with technology.Sure, we will still shop on-line much of the time, but even here, the ease and quality of that will depend to some degree on the relationship we already have with the retailer. Companies will be more responsive to the needs of the community and more integrated into them. And when we once again know the staff and know they care about us, shopping can resume its place as a fun and emotionally rewarding part of our lives.In the end it is all about engaging with the customer, making them excited, empowering them and showing them you care. When you look after them, they will keep coming back. And it is quite nice to think that the more advanced the technology becomes, the more it humanises us.

So, retailing, and even in the high street, has a potential very bright future. There is lots of competition, but good companies will thrive. Cost cutting is the wrong approach, even during recession. Investing in advanced technologies and improved services increases revenue, increase profits, leads to real economic growth, maintains potentially high wages, stimulates lots of new jobs in many sectors, and improves quality of life for all concerned. It really should be a no-brainer. Retailers should stop moaning and get on with it.

Climategate, Dracula and blood banks

I think that most of us over 40 are cynical enough to expect government enquries to be whitewashes, and indeed most others connected with the public sector. What is still surprising though is just how unashamed public authorities seem to be about conspicuously setting up yet another whitewash. They don’t even bother to pretend any more. The climategate enquiry (about the accusations that UEA’s CRU fiddled their climate research) is so obviously set up to produce a whitewash that any pretence of impartiality has vanished long before it even starts its job.

http://www.thegwpf.org/climategate/705-lord-oxburgh-cru-inquiry-chairman-has-a-conflict-of-interest.html puts it quite mildly. If these things are true, the chair is obviously not suited to lead the enquiry, so why has he been chosen. It is obvious that none of the people who believe there was any bad behaviour will accept the enquiry’s output now unless it agrees. If it says anything else, it is irrelevant and there will simply be calls for a proper enquiry. If it can only make one conclusion that is acceptable, then the people setting it up should be a bit more honest and just release that if it is their pre-determined conclusion and save us all the expense and intelligence insulting. And if they intend a whitewash, then again, just save us the money and time and abandon it.

As taxes rise and our government continues to waste tax revenues, every instance such as this of utterly pointless enquiries makes me even more angry that there is no direct means for taxpayers to intervene and stop the waste. This enquiry is no more sensible and no more likely to produce an unbiased result than allowing criminals to act as their own judge and jury, or at least able to nominate them from their own friends and family. For if the allegations are indeed true, that is exactly what it is happening.

I for one won’t accept the output. Even if it agrees with what I already think, it adds no additional value.

Trial migration to wordpress

Some more recent posts are on http://timeguide.wordpress.com/

Progress in climate science

It’s amazing what a few months can do. I’ve been watching the activity on the net since Climategate quite closely. Before that, I held the view that the earth was warming and that CO2 was probably a major contributor, but I was already sceptical that CO2 was the whole story because there were other plausible theories based on solar activity that affects cloud formation and they seemed to have a good foundation in historical evidence going back millennia. But like everyone else, I had no real idea how the climate worked. So, Climategate came for me in the middle of a learning period, where I decided that climate would figure much more in futures work, so needed to get a handle on it. I’ve now been studying climate science for about 9 months, so I still only qualify as a novice, and won’t be giving up my day job any time soon.

But Climategate was an eye-opener. I hadn’t realised just how flimsy the evidence for AGW (human-induced global warming) was until then, or how biased some of the climate scientists were, how they had done some bad science themselves, and then managed to block alternative theories, by withholding data, bullying journals into blocking publication, effectively seizing control of the IPCC and so on. I had assumed that the temperature data was sound, but it isn’t. I had assumed that the climate models took full account of solar activity, but they don’t. I assumed they looked at cloud formation mechanism in great detail, but they don’t. I assumed they looked at the data impartially instead of having a predetermined outcome and steering the models in that direction, but it turns out the models were designed to show warming and the inputs and equations selected and distorted to achieve that goal. Since many other researchers based their theories on that same data, their outputs were similarly corrupted. So it turns out that much of climate science has been corrupted and is badly in need of repair. Given that some of the data has been destroyed or altered, there is a lot of mess and damage to be cleared up.

But all is not lost. There is a lot of good science out there, and before climate science was politicised in the early 90s, some of the thinking and analysis was quite good quality. There have been several key studies recently that provide valuable insights, and several more well on the way. I have no doubt that science will recover slowly and we will end up with a good understanding how the Earth’s climate actually works, and will be able to figure out where it is going, and even some ideas how we might control it in some degree.

To give some idea how complex the field is, here are some of the things we know about the climate, and some that we know we don’t know.

There is historically a very strong correlation between cosmic radiation levels and climate. The galactic cosmic radiation (GCR) entering the solar system varies significantly, and the variations correlate well with temperature. The total amount of radiation we get from the sun varies only a small amount, and even the spectrum only varies by a little, but sunspot activity has a big effect on climate. It appears to do so via the enormous magnetic storms associated with sunspots, and the result is that cosmic rays are deflected and fewer enter the earth’s atmosphere. Thanks to some excellent work by Jasper Kirby and his colleagues at CERN, we know that cosmic rays entering the atmosphere produce a shower of other particles, and these can act as nucleation centres for water droplets to form from water vapour present in the atmosphere. These droplets can form clouds, and clouds can change reflect radiation back into space, and can also act as insulation. The exact mechanisms are not yet understood, but CERN is studying them now and expect to report in the next couple of years. As they do, we can start to include cloud formation related to sunspot activity and GCR variation into climate models.

Other studies by NASA on cloud formation will also help. Atmospheric behaviour is very complex, but the more we understand it, the better we can model it. In particular, NASA Goddard Space Research Centre has recently shown that aerosols in the atmosphere have a big effect on temperature. In particular, they discovered that black carbon from diesel exhausts has a huge effect on radiation absorption, and could account for much (50% or more) of the glacier melting that has been observed. Of course, it would be much easier to reduce black carbon than CO2. Other studies at the University of Waterloo suggest mechanism by which CFCs, released in the past by aerosol sprays and refrigerants, but now banned in many countries and phasing out in others, can interact with cosmic rays to break down ozone. Ozone absorbs solar radiation in the higher atmosphere, so reducing ozone results in more radiation being absorbed in the lower atmosphere, so increases warming. CFCs are a powerful greenhouse gas in their own right too. The reduction of CFCs in the atmosphere since 2000 correlates well with the levelling off of temperature, just as the rise over the previous decades correlates with the rise in temperature. As the ozone hole closes, temperature would tend to cool. Deforestation and change of land use is also very important. As trees are burnt, and as land turns to desert, or as fields are ploughed, dust enters the atmosphere. Small particles can stay there for days and affect cloud formation. And we may find that air travel contributes more to warming via contrails than by the CO2 emitted by the engines. Air traffic in most of the world flies too low to be so significant, but across the poles, the same altitude reaches a different region of the atmosphere where different reactions apply. The lower temperature at the poles results in a lower stratosphere, and some flights emit water vapour there. In a nutshell, it hangs around longer and causes more warming via cloud formation interactions with the lower atmosphere. This may be one of the major factors why the north pole is melting far faster than expected, while the south isn’t, having much less air traffic of course. But we need the science to be done, then we can model it properly.

So, with black carbon, dust, CFCs, ozone depletion, galactic cosmic ray flux variation, and a variable shield from solar magnetic activity, it already looks like CO2 is just one of a series of contributors to global warming. The CFCs may well turn out to be the bigger human influence. But as yet, these factors cannot all be properly compared, because we don’t understand the science behind the various interactions well enough. But we will be much better placed to do so in the next couple of years.

Scientists also know that oceans are responsible for much of the climatic variation. Oceans act as a huge thermal store as well as acting as a store of various gases. Movement of water between the depths and surface layers is a very slow process, so acts as both a long term damper and delay. Surface currents that transport heat around the world are also highly significant. And yet our understanding of the many factors is still in its infancy. El nino and la nina are still fairly new terms to most of us, and they still cannot be predicted well. Huge server farms are required just to model behaviour of small areas of ocean, so computer power is still one of the major bottlenecks. Getting good input data is another. It will be several years at least before we can accurately model ocean currents and properly predict their contributions to climate.

One of the most worrying factors is that the historical record indicated that we are in a period similar to the midieval warm period as far as solar activity and galactic radiation are concerned. The MWP was followed by a mini ice age, and there is informed speculation that we may well now be heading into another. It is overdue, and the patterns of warming and levelling off are just right. But the other factors of CFCs, CO2, desert dust, air travel and so on make it a very complex situation indeed.

The danger we are in as a result is that the climate could arguable go either way now. If it turns out that CO2 really is as bad as is made out, then temperature will increase and we are in danger of crossing some critical points where methane clathrates start to vapourise, giving runaway greenhouse warming. If on the other hand, and which is looking more likely by the day, CO2 is only a small player and the bigger effects are either natural or related to CFCs and black carbon, then we will see a few more years of turbulent weather followed by decades of cooling. Technology progress will reduce fossil fuel use anyway, so there will be less CO2 in the atmosphere to offset cooling. If we try to reduce CO2 in such a case, and also clear up other pollutants such as CFCs and black carbon, then we will suffer even more.

So we are like a guy standing on the edge of a cliff, wearing a blindfold. Lots of people are screaming at us, telling us to do something because we are in grave danger. But if we move before we can see the direction of the drop, we are as likely to die as to survive. By far the best course of action is to remove the blindfold before we do anything else.

So, we should spend much less money on wind farms, and put a lot more into research, making sure it goes to people who are more interested in doing good science than in proselytising a particular viewpoint.

can’t think of anythign to whine about

A few months since my last grump and I still can’t think of anything that is annoying me enough to blog about. Either the world is getting better or I’m getting less grumpy.

Executive pay. Why too many CXOs are paid far too much

The BBC chief says they need the best people, therefore have to pay the best too. This line of argument is seriously flawed but is cited in every boardroom remuneration battle. It too often results in highly excessive reward for mediocre performance.

I meet a great many CXOs in my line of work, and with a few exceptions who really are worth their pay, I have noticed very little correlation between overall capability or quality of judgement and rank. So why should they be paid much better? I have given some thought to the issue and it seems actually quite straightforward. Only vested interests maintain the ubiquity and longevity of this flawed reasoning that top executives have to be paid very richly within a company. There are a few stars who ought to be rewarded, but most senior posts can be filled just as well at much lower cost.

In the vast majority of situations, and at every stage of promotion, a number of candidates apply for the job. With only a few exceptions, there is very little to choose between the top several candidates, and the job goes to the one who performed marginally better in the interview. What is then conveniently forgotten is that although the job has been filled, there are still several almost equally good people who could do it. If the winning candidate were to move on for higher pay elsewhere, one of the others could easily pick up the baton and do just as well. It is therefore nonsense that the pay for the job has to be a lot higher than the grade below. If it were just 5% bigger than the lower grade, it would still be filled by someone just as competent. People would still want the more senior job because it is more senior. Pay is actually one of the lesser incentives, power being a much greater one.

If each grade were paid 5% more than the grade below, wages would be much flatter. Typical blue chips have about 7 layers of management, and even this is open to question in terms of wisdom. That means that the top job only really needs to pay 40% more than the lowest grade. If an executive then performs far better than expected, they could be rewarded by bonuses, just like any other staff. If such a remuneration policy were implemented, it would save companies a great deal of money.

Of course, experience should be rewarded too and a wage scale within each grade is still useful to reward people who stay with a company as they become more useful. It would be reasonable to implement a bigger differential between the top and bottom of a scale than between scales. A higher grade might mean more responsibility or longer hours, but doesn’t necessarily need significantly more talent, and usually the job could be done by any number of people at the layer below. Therefore, promotion should be rewarded less lucratively than progress up each pay scale according to experience and tenure, which does correlate very highly with being more useful. Too often, someone who is excellent at their job is promoted to one where they are much less excellent, and the company suffers (as does the person). Rewarding skill and experience within the job is usually a better idea than promoting someone.

Clearly, some people do deserve to be paid much more than their colleagues. In many fields – design, leadership, research, engineering, teaching, law, medicine and so on, there are always a few high fliers who are so good at their job that they produce many times the value of their more ordinary colleagues. A top engineer might invent many of the key products on which the company depends, whereas many others perform at levels where they are easily replaced or outsourced. A top designer might make the product so appealing that it sells far better than it would otherwise. Companies should try hard to keep such people since they generate a disproportionate amount of income. But even here, pay is only one of a range of incentives that appeal to people, so companies should spend more effort looking at the individual’s goals and desires and target them more accurately. Bonuses and pay can be used of course if that is appropriate. In this case, there is no good reason why a top designer should not be paid more than the CEO.

So, the problem is not that some people should not be paid more, it is that it isn’t always necessary to pay more. Just beating a few other candidates at an interview does not in itself guarantee that a person is much more valuable than others who also applied. In most cases they aren’t.

So, how to identify those that should be paid more? Simple. Top people stick out. If they don’t stick out, they aren’t top people. Top people don’t get discovered at job interviews. If a product is hailed as having a wonderful design, find the people who were responsible and reward them. If a team performs well ahead of expectation, first reward them, and then ask them why they did so well. If they think that excellent leadership was a key factor, then reward the leader again too. Just don’t always jump to conclusions and always reward the people who happen to be in charge at the time something goes right. It may well have happened anyway, or even in spite of their involvement.

One of the big problems that many companies are now discovering is that top people no longer want to work for them. Often those people have found that thanks to the net, they can work freelance on a contract by contract basis for the highest bidder. Some of them can’t now be bought at any price as permanent employees, other will respond to higher offers. The result will be a small elite who are highly rewarded, and a large majority who are simply commodities and whose skills can be acquired at low cost either locally or from other countries.

So, what of the BBC and other companies paying high salaries for top people. Well, some of them deserve it. Having them on board can save a company or dramatically improve its performance. But the simple truth is that most of the so-called top people are not top at all, but only marginally better than the competition at a series of interviews. They deserve 40% more than the junior manager, and not a penny more. We need to spend a lot less on high blanket remuneration of all executives, and start spending a little effort on identifying the really top people and reward them instead. It doesn’t take that much more effort, because as I said, the top people really stick out, and if they don’t, they simply aren’t top people.

Top pay for top people, but not for most CXOs

The BBC chief says they need the best people, therefore have to pay the best too. This line of argument is seriously flawed but is cited in every boardroom remuneration battle. It too often results in highly excessive reward for mediocre performance.

I meet a great many CXOs in my line of work, and with a few exceptions who really are worth their pay, I have noticed very little correlation between overall capability or quality of judgement and rank. So why should they be paid much better? I have given some thought to the issue and it seems actually quite straightforward. Only vested interests maintain the ubiquity and longevity of this flawed reasoning that top executives have to be paid very richly within a company. There are a few stars who ought to be rewarded, but most senior posts can be filled just as well at much lower cost.

In the vast majority of situations, and at every stage of promotion, a number of candidates apply for the job. With only a few exceptions, there is very little to choose between the top several candidates, and the job goes to the one who performed marginally better in the interview. What is then conveniently forgotten is that although the job has been filled, there are still several almost equally good people who could do it. If the winning candidate were to move on for higher pay elsewhere, one of the others could easily pick up the baton and do just as well. It is therefore nonsense that the pay for the job has to be a lot higher than the grade below. If it were just 5% bigger than the lower grade, it would still be filled by someone just as competent. People would still want the more senior job because it is more senior. Pay is actually one of the lesser incentives, power being a much greater one.

If each grade were paid 5% more than the grade below, wages would be much flatter. Typical blue chips have about 7 layers of management, and even this is open to question in terms of wisdom. That means that the top job only really needs to pay 40% more than the lowest grade. If an executive then performs far better than expected, they could be rewarded by bonuses, just like any other staff. If such a remuneration policy were implemented, it would save companies a great deal of money.

Of course, experience should be rewarded too and a wage scale within each grade is still useful to reward people who stay with a company as they become more useful. It would be reasonable to implement a bigger differential between the top and bottom of a scale than between scales. A higher grade might mean more responsibility or longer hours, but doesn’t necessarily need significantly more talent, and usually the job could be done by any number of people at the layer below. Therefore, promotion should be rewarded less lucratively than progress up each pay scale according to experience and tenure, which does correlate very highly with being more useful. Too often, someone who is excellent at their job is promoted to one where they are much less excellent, and the company suffers (as does the person). Rewarding skill and experience within the job is usually a better idea than promoting someone.

Clearly, some people do deserve to be paid much more than their colleagues. In many fields – design, leadership, research, engineering, teaching, law, medicine and so on, there are always a few high fliers who are so good at their job that they produce many times the value of their more ordinary colleagues. A top engineer might invent many of the key products on which the company depends, whereas many others perform at levels where they are easily replaced or outsourced. A top designer might make the product so appealing that it sells far better than it would otherwise. Companies should try hard to keep such people since they generate a disproportionate amount of income. But even here, pay is only one of a range of incentives that appeal to people, so companies should spend more effort looking at the individual’s goals and desires and target them more accurately. Bonuses and pay can be used of course if that is appropriate. In this case, there is no good reason why a top designer should not be paid more than the CEO.

So, the problem is not that some people should not be paid more, it is that it isn’t always necessary to pay more. Just beating a few other candidates at an interview does not in itself guarantee that a person is much more valuable than others who also applied. In most cases they aren’t.

So, how to identify those that should be paid more? Simple. Top people stick out. If they don’t stick out, they aren’t top people. Top people don’t get discovered at job interviews. If a product is hailed as having a wonderful design, find the people who were responsible and reward them. If a team performs well ahead of expectation, first reward them, and then ask them why they did so well. If they think that excellent leadership was a key factor, then reward the leader again too. Just don’t always jump to conclusions and always reward the people who happen to be in charge at the time something goes right. It may well have happened anyway, or even in spite of their involvement.

One of the big problems that many companies are now discovering is that top people no longer want to work for them. Often those people have found that thanks to the net, they can work freelance on a contract by contract basis for the highest bidder. Some of them can’t now be bought at any price as permanent employees, other will respond to higher offers. The result will be a small elite who are highly rewarded, and a large majority who are simply commodities and whose skills can be acquired at low cost either locally or from other countries.

So, what of the BBC and other companies paying high salaries for top people. Well, some of them deserve it. Having them on board can save a company or dramatically improve its performance. But the simple truth is that most of the so-called top people are not top at all, but only marginally better than the competition at a series of interviews. They deserve 40% more than the junior manager, and not a penny more. We need to spend a lot less on high blanket remuneration of all executives, and start spending a little effort on identifying the really top people and reward them instead. It doesn’t take that much more effort, because as I said, the top people really stick out, and if they don’t, they simply aren’t top people.

redesigning democracy for the 21st Century

So, another election set in the dark ages. Three parties to pick from, all of them unattractive. I am 49 and this is the first election where I don’t want to vote for any of the parties. I am very dissatisfied with the current state of democracy, especially in the UK, where we have all the means to make it better but choose not to because of vested interests.

Now that we have a good internet, we can and should redesign the democratic system to make it, well, more democratic.  But let’s not throw the baby out with the nappy. There are a few things right with the current system so let’s make sure we keep those.

The most important thing about the UK system is that it is a representational democracy. This is a good idea, whereas letting everyone vote directly on every issue isn’t. Remember all the stupid decisions that get made in student unions, where any idiotic proposal can be put forward and because only a few people will bother to vote on it, most of whom are its instigators, it gets passed. Our representatives also save us lots of effort by making most of the decisions for us, acting supposedly in our best interests (I’ll address this bit later).

Secondly, having a party-based system saves a lot of effort and confusion. In general, one party is likely to represent your allegiances on a wide range of issues much more closely than any of the others. It would be nice to have some say in the areas where you differ and which matter to you, and again, more later.

But already, we have a conflict. Today, you can vote for a party or for a specific candidate, but only some of the time will those goals coincide. You may hate the local candidate put forward by your favourite party. You may hate the party that your favourite candidate belongs to, but still want that individual to represent your local interests.

Another big problem is that party allegiances are spread very differently around the country. With a system that allows only one winner per constituency, we end up with a very distorted representation of the electorate. Parties with concentrations of loyal voters will get far more seats than those whose voters are spread more evenly. Although those who benefit from this will naturally support such a system, it could hardly be considered fair that some voters end up with far more representation than others.

So we could really do with a system that allows you to do blend both support for a particular candidate and support for a party. It would then be very nice if, even after the election, you could also make sure that your preferences on specific issues are also taken into account.

Simple. At an election, why not allow people to vote for the party of their choice and also for the local candidate of their choice. So you tick two boxes, not much extra effort. In parallel to the four-yearly vote, we could also have a database where voters can maintain a tick list on every policy preference. To save effort, their chosen party or candidate would fill in all the boxes according to their default, so people would only want to tweak a few decisions here and there. They could then modify this any time they like. At any point in time, politicians could consult the voter preference database to see what the electorate wants right now on every issue, and would be able to take this into account in their debates.

The advantage of the party and candidate voting system would come into its own in levelling the parliamentary playing field to eradicate the unfairness of unequal voter distribution. Voters would have a local representative who looks after their local interests. But when votes are taken on nationwide issues, each MP would have a vote scaled according to the national support of that party. So, if a party with a large national support ends up with too few seats, they would be given a bigger vote. Those with too many seats would get less than one vote each. With modern computing, it would not be difficult managing such a system. This system would be very beneficial to parties such as the liberal democrats, who always end up with far fewer seats than their proportion of the national vote would indicate fair.

In this way, each constituency gets the MP it wants, and each party gets the same representation in parliament that it got in the national vote. Such a system avoids the worst consequences of traditional proportional representation, which often results in the MPs being the least hated rather than the most loved, and also removes a great deal of the value of local representation.

This system could be dynamically applied in other ways too. Scottish MPs may be permitted a smaller (or zero) vote on English matters, and vice versa. Women MPs would get a higher vote on gender-related issues if they have too few MPs to be otherwise representative. The same could be applied to any racial, religious, geographic or demographic issues. The say that each MP gets would be proportional to the voter population that they represent in that domain. And of course, this could take full account of the voter preference database.

So, with a little application of basic IT in the democartic system, we could have much more dynamic say in the running of our country. It would be more representative of what we all actually want. Our local needs would be protected by our locally elected MP, and the say they have in each parliamentary vote on national issues would be scaled according to the national subscription to their party. And the voter preference database would act as a third voting component, ensuring that our MPs are seen to take account of our wishes on every issue.

All we need now is a bunch of MPs who care more about the principles of democracy than in protecting their own short term interests. Don’t hold your breath.